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SECURITIES AND EXCHANGE COMMISSION
File No.* SR - 2014 - * 25
WASHINGTON, D.C. 20549
Amendment No. (req. for Amendments *) 1
Form 19b-4
Page 1 of * 51
Filing by
EDGX Exchange, Inc.
Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934
Initial *
Amendment *
Withdrawal
Section 19(b)(2) *
Section 19(b)(3)(A) *
Section 19(b)(3)(B) *
Rule
Extension of Time Period
for Commission Action *
Pilot
19b-4(f)(1)
Date Expires *
19b-4(f)(5)
19b-4(f)(3)
19b-4(f)(6)
Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010
Section 806(e)(1) *
Security-Based Swap Submission pursuant
to the Securities Exchange Act of 1934
Section 806(e)(2) *
Exhibit 2 Sent As Paper Document
19b-4(f)(4)
19b-4(f)(2)
Section 3C(b)(2) *
Exhibit 3 Sent As Paper Document
Description
Provide a brief description of the action (limit 250 characters, required when Initial is checked *).
Contact Information
Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization
prepared to respond to questions and comments on the action.
First Name * Chris
Last Name * Solgan
Title *
Regulatory Counsel
E-mail *
[email protected]
Telephone * (201) 942-8321
Fax
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized.
(Title *)
Regulatory Counsel
Date 11/13/2014
By
Chris Solgan
(Name *)
NOTE: Clicking the button at right will digitally sign and lock
this form. A digital signature is as legally binding as a physical
signature, and once signed, this form cannot be changed.
[email protected]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For complete Form 19b-4 instructions please refer to the EFFS website.
Form 19b-4 Information *
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Exhibit 1 - Notice of Proposed Rule Change *
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Exhibit 1A- Notice of Proposed Rule
Change, Security-Based Swap Submission,
or Advance Notice by Clearing Agencies *
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Exhibit 2 - Notices, Written Comments,
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The self-regulatory organization must provide all required information, presented in a
clear and comprehensible manner, to enable the public to provide meaningful
comment on the proposal and for the Commission to determine whether the proposal
is consistent with the Act and applicable rules and regulations under the Act.
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change being deemed not properly filed. See also Rule 0-3 under the Act (17
CFR 240.0-3)
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change, security-based swap submission, or advance notice being deemed not
properly filed. See also Rule 0-3 under the Act (17 CFR 240.0-3)
Copies of notices, written comments, transcripts, other communications. If such
documents cannot be filed electronically in accordance with Instruction F, they shall be
filed in accordance with Instruction G.
Exhibit Sent As Paper Document
Exhibit 3 - Form, Report, or Questionnaire
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Copies of any form, report, or questionnaire that the self-regulatory organization
proposes to use to help implement or operate the proposed rule change, or that is
referred to by the proposed rule change.
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Exhibit 4 - Marked Copies
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Exhibit 5 - Proposed Rule Text
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Partial Amendment
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The full text shall be marked, in any convenient manner, to indicate additions to and
deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit
the staff to identify immediately the changes made from the text of the rule with which
it has been working.
The self-regulatory organization may choose to attach as Exhibit 5 proposed changes
to rule text in place of providing it in Item I and which may otherwise be more easily
readable if provided separately from Form 19b-4. Exhibit 5 shall be considered part
of the proposed rule change.
If the self-regulatory organization is amending only part of the text of a lengthy
proposed rule change, it may, with the Commission's permission, file only those
portions of the text of the proposed rule change in which changes are being made if
the filing (i.e. partial amendment) is clearly understandable on its face. Such partial
amendment shall be clearly identified and marked to show deletions and additions.
SR-EDGX-2014-25 Amendment No. 1
Page 3 of 51
1.
Text of the Proposed Rule Change
(a)
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange
Act of 1934 (“Act”)1 and Rule 19b-4 thereunder,2 EDGX Exchange, Inc. (“EDGX” or the
“Exchange”) previously submitted a rule filing (SR-EDGX-2014-25) on October 30,
2014 with the Securities and Exchange Commission (“Commission”), which proposed to
establish a new market data product called the BATS One Feed. This Amendment No. 1
to SR-EDGX-2014-25 amends and replaces the original proposal in its entirety. The
Exchange is filing this Amendment No. 1 to remove a reference to fees in the summary
of the proposal, describe the underlying data feeds that may be used to construct the
proposed BATS One feed, and represent that it will not offer the proposed BATS One
feed until approved by the Commission and the effectiveness of a rule filing to establish
the fees for BATS One.
The text of the proposed BATS One Feed is attached as Exhibit 5 and is available
on the Exchange’s website at www.directedge.com, at the Exchange’s principal office
and at the Public Reference Room of the Commission.
2.
(b)
Not applicable.
(c)
Not applicable.
Procedures of the Self-Regulatory Organization
The Exchange submits the proposed rule change pursuant to authority delegated
by the Board of Directors of the Exchange on February 11, 2014. Exchange staff will
advise the Exchange’s Board of Directors of any action taken pursuant to delegated
authority. No other action is necessary for the filing of the rule change and, therefore, the
1
15 U.S.C. 78s(b)(1).
2
17 CFR 240.19b-4.
SR-EDGX-2014-25 Amendment No. 1
Page 4 of 51
Exchange’s internal procedures with respect to the proposed change are complete.
The persons on the Exchange staff prepared to respond to questions and
comments on the proposed rule change are:
Eric Swanson
Executive Vice President and
General Counsel
(913) 815-7000
3.
Chris Solgan
Regulatory Counsel
(201) 942-8321
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a)
Purpose
The Exchange proposes to establish a new market data product called the BATS
One Feed. As described more fully below, the BATS One Feed is a data feed that will
disseminate, on a real-time basis, the aggregate best bid and offer (“BBO”) of all
displayed orders for securities traded on EDGX and its affiliated exchanges3
(collectively, the “BATS Exchanges”) and for which the BATS Exchanges report quotes
under the Consolidated Tape Association (“CTA”) Plan or the Nasdaq/UTP Plan.4 The
BATS One Feed will also contain the individual last sale information for EDGX and each
of its affiliated exchanges. In addition, the BATS One Feed will contain optional
3
EDGX’s affiliated exchanges are EDGA Exchange, Inc. (“EDGA”), BATS
Exchange, Inc. (“BATS”), and BATS Y-Exchange, Inc. (“BYX”). On January
31, 2014, Direct Edge Holdings LLC (“DE Holdings”), the former parent
company of the Exchange and EDGA, completed its business combination with
BATS Global Markets, Inc., the parent company of BATS and BYX. See
Securities Exchange Act Release No. 71449 (January 30, 2014), 79 FR 6961
(February 5, 2014) (SR-EDGX-2013-43). Upon completion of the business
combination, DE Holdings and BATS Global Markets, Inc. each became
intermediate holding companies, held under a single new holding company. The
new holding company, formerly named “BATS Global Markets Holdings, Inc.,”
changed its name to “BATS Global Markets, Inc.”
4
The Exchange understands that each of the BATS Exchanges will separately file
substantially similar proposed rule changes with the Commission to implement
the BATS One Feed and its related fees.
SR-EDGX-2014-25 Amendment No. 1
Page 5 of 51
functionality which will enable recipients to elect to receive aggregated two-sided
quotations from the BATS Exchanges for up to five (5) price levels.
The BATS One Feed offers market data vendors and purchasers a suitable
alternative to the use of consolidated data where consolidated data are not required to be
purchased or displayed. The Exchange proposes to offer the BATS One Feed voluntarily
in response to demand from vendors, and subscribers that are interested in receiving the
aggregate BBO and last sale information from the BATS Exchanges as part of a single
data feed. Specifically, BATS One can be used by industry professionals and retail
investors looking for a cost effective, easy-to-administer, high quality market data
product with the characteristics of the BATS One Feed.
The Exchange believes that the BATS One Feed would provide high-quality,
comprehensive last sale and BBO data for the BATS Exchanges in a unified view and
respond to subscriber demand for such a product. The Exchange notes that an anticipated
end user might use the BATS One Feed for purposes of identifying an indicative price of
Tape A, B, and C securities through leveraging the depth and breadth of BATS
Exchanges without having to purchase consolidated data and thus it would not be a
latency-sensitive product. The Exchange does not anticipate that an end user would, or
could, use the BATS One Feed data for purposes of making order-routing or trading
decisions. Rather, the Exchange notes that under Rule 603 of Regulation NMS, the
BATS One Feed could not be substituted for consolidated data in all instances in which
consolidated data is used and certain subscribers would still be required to purchase
consolidated data for trading and order-routing purposes.5
5
17 CFR § 242.603(c).
SR-EDGX-2014-25 Amendment No. 1
Page 6 of 51
Finally, the proposed BATS One Feed would provide investors with new options
for receiving market data and compete with similar market data products proposed by the
New York Stock Exchange, Inc. (“NYSE”) and those currently offered by the Nasdaq
Stock Market LLC (“Nasdaq”).6 The provision of new options for investors to receive
market data was a primary goal of the market data amendments adopted by Regulation
NMS.7
Description of the BATS One Feed
The BATS One Feed will contain the aggregate BBO of the BATS Exchanges for
all securities that are traded on the BATS Exchanges and for which the BATS Exchanges
report quotes under the CTA Plan or the Nasdaq/UTP Plan. The aggregate BBO would
include the total size of all orders at the BBO available on all BATS Exchanges.8 The
BATS One Feed would also disseminate last sale information for each of the individual
6
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq Trade Reporting Facility
(“TRF”));Nasdaq NLS Plus,
http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus (last visited July 8, 2014)
(data feed providing last sale data as well as consolidated volume from the
following Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq,
FINRA/Nasdaq TRF, Nasdaq OMX BX, and Nasdaq OMX PSX); Securities
Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494 (August 8,
2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule Change
Establishing the NYSE Best Quote & Trades (“BQT”) Data Feed);
http://www.nyxdata.com/Data-Products/NYSE-Best-Quote-and-Trades (last
visited May 27, 2014) (data feed providing unified view of BBO and last sale
information for the NYSE, NYSE Arca, and NYSE MKT).
7
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
8
The Exchange notes that quotations of odd lot size, which is generally less than
100 shares, are included in the total size of all orders at a particular price level in
the BATS One Feed but are currently not reported by the BATS Exchanges to the
consolidated tape.
SR-EDGX-2014-25 Amendment No. 1
Page 7 of 51
BATS Exchanges (collectively with the aggregate BBO, the “BATS One Summary
Feed”). The last sale information will include the price, size, time of execution, and
individual BATS Exchange on which the trade was executed. The last sale message will
also include the cumulative number of shares executed on all BATS Exchanges for that
trading day. The Exchange will disseminate the aggregate BBO of the BATS Exchanges
and last sale information through the BATS One Feed no earlier than each individual
BATS Exchange provides its BBO and last sale information to the processors under the
CTA Plan or the Nasdaq/UTP Plan.
The BATS One Feed would also consist of Symbol Summary, Market Status,
Retail Liquidity Identifier on behalf of BYX, Trading Status, and Trade Break messages.
The Symbol Summary message will include the total executed volume across all BATS
Exchanges. The Market Status message is disseminated to reflect a change in the status
of one of the BATS Exchanges. For example, the Market Status message will indicate
whether one of the BATS Exchanges is experiencing a systems issue or disruption and
quotation or trade information from that market is not currently being disseminated via
the BATS One Feed as part of the aggregated BBO. The Market Status message will also
indicate where BATS Exchange is no longer experiencing a systems issue or disruption
to properly reflect the status of the aggregated BBO.
The Retail Liquidity Identifier indicator message will be disseminated via the
BATS One Feed on behalf of the BYX only pursuant to BYX’s Retail Price Improvement
(“RPI”) Program.9 The Retail Liquidity Identifier indicates when RPI interest priced at
9
For a description of BYX’s RPI Program, see BYX Rule 11.24. See also
Securities Exchange Act Release No. 68303 (November 27, 2012), 77 FR 71652
(December 3, 2012) (SR-BYX-2012-019) (Order Granting Approval of Proposed
SR-EDGX-2014-25 Amendment No. 1
Page 8 of 51
least $0.001 better than BYX’s Protected Bid or Protected Offer for a particular security
is available in the System. The Exchange proposes to disseminate the Retail Liquidity
Indicator via the BATS One Feed in the same manner as it is currently disseminated
through consolidated data streams (i.e., pursuant to the Consolidated Tape Association
Plan/Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B securities, and
the Nasdaq UTP Plan for Tape C securities) as well as through proprietary BYX data
feeds. The Retail Liquidity Identifier will reflect the symbol and the side (buy or sell) of
the RPI interest, but does not include the price or size of the RPI interest. In particular,
like CQ and UTP quoting outputs, the BATS One Feed will include a field for codes
related to the Retail Price Improvement Identifier. The codes indicate RPI interest that is
priced better than BYX’s Protected Bid or Protected Offer by at least the minimum level
of price improvement as required by the Program.
The Trade Break message will indicate when an execution on a BATS Exchange
is broken in accordance with the individual BATS Exchange’s rules.10 The Trading
Status message will indicate the current trading status of a security on each individual
BATS Exchange. For example, a Trading Status message will be sent when a short sale
price restriction is in effect pursuant to Rule 201 of Regulation SHO (“Short Sale Circuit
Breaker”),11 or the security is subject to a trading halt, suspension or pause declared by
the listing market. A Trading Status message will be sent whenever a security’s trading
Rule Change, as Modified by Amendment No. 2, to Adopt a Retail Price
Improvement Program); Securities Exchange Act Release No. 67734 (August 27,
2012), 77 FR 53242 (August 31, 2012) (SR-BYX-2019-019) (Notice of Filing of
Proposed Rule Change to Adopt a Retail Price Improvement Program).
10
See, e.g., Exchange and EDGA Rule 11.13, Clearly Erroneous Executions, and
BATS and BYX Rule 11.17, Clearly Erroneous Executions.
11
17 CFR 242.200(g); 17 CFR 242.201
SR-EDGX-2014-25 Amendment No. 1
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status changes.
Optional Aggregate Depth of Book. The BATS One Feed will also contain
optional functionality which will enable recipients to receive two-sided quotations from
the BATS Exchanges for five (5) price levels for all securities that are traded on the
BATS Exchanges in addition to the BATS One Summary Feed (“BATS One Premium
Feed”). For each price level on one of the BATS Exchanges, the BATS One Premium
Feed option of the BATS One Feed will include a two-sided quote and the number of
shares available to buy and sell at that particular price level.12
Implementation Date
The Exchange anticipates making available the BATS One feed as soon as
practicable after approval of the proposed rule change by the Commission and the
effectiveness of a rule filing to establish the fees for BATS One.13
(b)
Statutory Basis
The Exchange believes that the proposed BATS One Feed is consistent with
Section 6(b) of the Act,14 in general, and furthers the objectives of Section 6(b)(5) of the
Act,15 in particular, in that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market system, and to
12
Recipients who do not elect to receive the BATS One Premium Feed will receive
the aggregate BBO of the BATS Exchanges under the BATS Summary Feed,
which, unlike the BATS Premium Feed, would not delineate the size available at
the BBO on each individual BATS Exchange.
13
The Exchange intends to file a separate proposal establishing the fees for BATS
One.
14
15 U.S.C. 78f.
15
15 U.S.C. 78f(b)(5).
SR-EDGX-2014-25 Amendment No. 1
Page 10 of 51
protect investors and the public interest, and that it is not designed to permit unfair
discrimination among customers, brokers, or dealers. This proposal is in keeping with
those principles in that it promotes increased transparency through the dissemination of
the BATS One Feed. The Exchange also believes this proposal is consistent with Section
6(b)(5) of the Act because it protects investors and the public interest and promotes just
and equitable principles of trade by providing investors with new options for receiving
market data as requested by market data vendors and purchasers that expressed an
interest in exchange-only data for instances where consolidated data is no longer required
to be purchased and displayed. The proposed rule change would benefit investors by
facilitating their prompt access to real-time last sale information and best-bid-and-offer
information contained in the BATS One Feed.
The Exchange also believes that the proposed rule change is consistent with
Section 11(A) of the Act16 in that it supports (i) fair competition among brokers and
dealers, among exchange markets, and between exchange markets and markets other than
exchange markets and (ii) the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in securities. Furthermore, the
proposed rule change is consistent with Rule 603 of Regulation NMS,17 which provides
that any national securities exchange that distributes information with respect to
quotations for or transactions in an NMS stock do so on terms that are not unreasonably
discriminatory.
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to offer new and
16
15 U.S.C. 78k-1.
17
See 17 CFR 242.603.
SR-EDGX-2014-25 Amendment No. 1
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unique market data to consumers of such data. It was believed that this authority would
expand the amount of data available to users and consumers of such data and also spur
innovation and competition for the provision of market data. The Exchange believes that
the data products proposed herein are precisely the sort of market data products that the
Commission envisioned when it adopted Regulation NMS. The Commission concluded
that Regulation NMS – by lessening regulation of the market in proprietary data – would
itself further the Act’s goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data
beyond the prices, sizes, market center identifications of the NBBO and
consolidated last sale information are not required to receive (and pay for)
such data. The Commission also believes that efficiency is promoted
when broker-dealers may choose to receive (and pay for) additional
market data based on their own internal analysis of the need for such
data.18
By removing “unnecessary regulatory restrictions” on the ability of exchanges to sell
their own data, Regulation NMS advanced the goals of the Act and the principles
reflected in its legislative history.
If the free market should determine whether proprietary data is sold to brokerdealers at all, it follows that the price at which such data is sold should be set by the
market as well. The BATS One Feed is precisely the sort of market data product that the
Commission envisioned when it adopted Regulation NMS.
The BATS One Feed would be distributed and purchased on a voluntary basis, in
that neither the BATS Exchanges nor market data distributors are required by any rule or
regulation to make this data available. Accordingly, distributors and users can
18
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496
(June 29, 2005) (File No. S7-10-04).
SR-EDGX-2014-25 Amendment No. 1
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discontinue use at any time and for any reason, including due to an assessment of the
reasonableness of fees charged.
The Exchange believes that the proposed BATS One Feed will offer an alternative
to the use of consolidated data products and proprietary data products offered by the
NYSE and Nasdaq. Nasdaq Basic is a product that includes two feeds, QBBO, which
provides BBO information for all U.S. exchange-listed securities on Nasdaq and NLS
Plus, which provides last sale data as well as consolidated volume from the following
Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq, FINRA/Nasdaq
TRF,19 Nasdaq OMX BX, and Nasdaq OMX PSX.20 According to Nasdaq, seven
vendors and more than 1,000 firms subscribe to Nasdaq Basic, including 9 out of 10 of
the largest banks.21
Likewise, the NYSE has proposed NYSE BQT, which would include the BBO
and last sale information for the NYSE, NYSE Arca, and NYSE MKT.22 The Exchange
19
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq TRF).
20
See Nasdaq NLS Plus, http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus
(last visited July 8, 2014) (data feed providing last sale data as well as
consolidated volume from the following Nasdaq OMX markets for U.S.
exchange-listed securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX).
21
See Nasdaq Basic, Doing More with Less, available at
http://www.brainshark.com/nasdaqomx/vu?pi=zG8z33O6ozAgBpz0&tx=preview
&preview=1 and
http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic#vendors.
22
See Securities Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494
(August 8, 2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule
Change Establishing the NYSE BQT Data Feed); http://www.nyxdata.com/DataProducts/NYSE-Best-Quote-and-Trades (last visited May 27, 2014) (data feed
SR-EDGX-2014-25 Amendment No. 1
Page 13 of 51
believes the BATS One Feed will offer a competitive alternative to the existing Nasdaq
Basic product and the proposed NYSE product.
In addition, the proposal would not permit unfair discrimination because the
product will be available to all of the Exchange’s customers and market data vendors on
an equivalent basis. In addition, any customer that wishes to purchase one or more of the
individual data feeds offered by the BATS Exchanges would be able to do so.
In addition, the Exchange does not believe that the proposal would permit unfair
discrimination among customers, brokers, or dealers and thus is consistent with the Act
because the Exchange will be offering the product on terms that a competing vendor
could offer a competing product. Specifically, the proposed data feed does not represent
Exchange core data, but rather a new product that represents an aggregation and
consolidation of existing, previously filed individual market data products of the BATS
Exchanges. As such, a competing vendor could similarly obtain the underlying data
feeds and perform a similar aggregation and consolidation function to create the same
data product with the same latency and cost as the Exchange.
The Exchange has taken into consideration its affiliated relationship with EDGA,
BYX, and BZX in its design of the BATS One Feed to assure that vendors would be able
to offer a similar product on the same terms as the Exchange, both from the perspective
of latency and cost. As discussed above, the Exchange proposes to offer the BATS One
Feed voluntarily in response to demand from vendors, and subscribers that are interested
in receiving the aggregate BBO and last sale information from the BATS Exchanges as
part of a single data feed. Specifically, BATS One can be used by industry professionals
providing unified view of BBO and last sale information for the NYSE, NYSE
Arca, and NYSE MKT).
SR-EDGX-2014-25 Amendment No. 1
Page 14 of 51
and retail investors looking for a cost effective, easy-to-administer, high quality market
data product with the characteristics of the BATS One Feed. The BATS One Feed would
help protect a free and open market by providing vendors and subscribers additional
choices in receiving this type of market data, thus promoting competition and innovation.
With respect to latency, the path for distribution by the Exchange of BATS One
Feed would not be faster than a vendor that independently created a BATS One-like
product could distribute its own product. As such, the proposed BATS One data feed is a
data product that a competing vendor could create and sell without being in a
disadvantaged position relative to the Exchange. In recognition that the Exchange is the
source of its own market data and is affiliated with EDGA, BATS and BYX, the
Exchange represents that the source of the market data it would use to create the
proposed BATS One Feed is available to other vendors. Specifically, the Exchange
would use the following data feeds to create the proposed BATS One Feed, each of
which is available to other vendors: the Exchange’s EdgeBook Depth feed, the EdgeBook
Depth feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The BATS
Exchanges will continue to make available these individual underlying feeds, and thus,
the source of the market data it would use to create the proposed BATS One feed is the
same as the source available to other vendors.
In order to create the BATS One Feed, the Exchange will receive the individual
data feeds from each BATS Exchange and, in turn, aggregate and summarize that data to
create the BATS One Feed. This is the same process a competing vendor would undergo
should it create a market data product similar to the BATS One Feed to distribute to its
end users. In addition, the servers of most competing vendors are likely located in the
SR-EDGX-2014-25 Amendment No. 1
Page 15 of 51
same facilities as the Exchange, and, therefore, should receive the individual data feed
from each BATS Exchange on or about the same time the Exchange would for it to create
the BATS One Feed. Therefore, a competing vendor that is located in the same facilities
as the Exchange could obtain the underlying data feeds from the BATS Exchanges on the
same latency basis as the system that would be performing the aggregation and
consolidation of the proposed BATS One Feed and provide the same type of product to
its customers with the same latency they could achieve by purchasing the BATS One
Feed from the Exchange. As such, the Exchange would not have any unfair advantage
over competing vendors with respect to obtaining data from the individual BATS
Exchanges, in fact, the technology supporting the BATS One Feed would similarly need
to obtain the Exchange’s data feed as well and even this connection would be on a level
playing field with a competing vendor located at the same facility as the Exchange. The
Exchange has designed the BATS One data feed so that it would not have a competitive
advantage over a competing vendor with respect to the speed of access to those
underlying data feeds. Likewise, the BATS One data feed would not have a speed
advantage vis-à-vis competing vendors located in the same data center as the Exchange
with respect to access to end user customers, whether those end users are also located in
the same data center or not.
With regard to cost, the Exchange will file a separate rule filing with the
Commission to establish fees for BATS One which would be designed to ensure that
vendors could compete with the Exchange by creating a similar product as the BATS One
Feed. The pricing the Exchange would charge for the BATS One Feed would not be
lower than the cost to a vendor of receiving the underlying data feeds and of maintaining
SR-EDGX-2014-25 Amendment No. 1
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servers in the same facility as the Exchange to receive the data feeds with no greater
latency than the Exchange. The pricing the Exchange would charge clients for the BATS
One Feed compared to the cost of the individual data feeds from the BATS Exchanges
would enable a vendor to receive the underlying data feeds and offer a similar product on
a competitive basis and with no greater latency than the Exchange. The Distribution Fees
that the Exchange intends to propose for the BATS One Feed would be equal to the
combined fee of subscribing to each individual data feed,23 therefore, enabling a vendor
to create a competing product based on the individual data feeds and charge its clients a
fee that it believes reflects the value of the aggregation and consolidation function that is
competitive with BATS One Feed pricing. The Exchanges believes that the incremental
cost to a particular vendor for aggregation can be supported by the vendor’s revenue
opportunity and may be inconsequential if such vendor already has systems in place to
perform these functions as part of creating its proprietary market data products and is able
to allocate these costs over numerous products and customer relationships. For these
reasons, the Exchange believes that vendors could readily offer a product similar to the
BATS One Feed on a competitive basis at a similar cost.
4.
Self-Regulatory Organization’s Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will result in any
burden on competition that is not necessary or appropriate in furtherance of the purposes
23
The combined external distribution fee for the individual data feeds of the BATS
Exchanges is $12,500.00 per month. The monthly external distribution fee is
$2,500 per month for the EdgeBook Depth feed for the Exchange, $2,500 per
month for the EdgeBook Depth feed for EDGA, $2,500 for the BYX PITCH
Feed, and $5,000 for the BATS PITCH Feed.
SR-EDGX-2014-25 Amendment No. 1
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of the Act, as amended. Because other exchanges already offer similar products,24 the
Exchange’s proposed BATS One Feed will enhance competition. Specifically, the BATS
One Feed was developed to compete with similar market data products offered by
Nasdaq and proposed by the NYSE.25 The BATS One Feed will foster competition by
providing an alternative market data product to those offered by Nasdaq and the NYSE.
This proposed new data feed provides investors with new options for receiving market
data, which was a primary goal of the market data amendments adopted by Regulation
NMS.26
The proposed BATS One Feed would enhance competition by offering a market
data product that is designed to compete directly with similar products offered by the
NYSE and Nasdaq. Nasdaq Basic is a product that includes two feeds, QBBO, which
provides BBO information for all U.S. exchange-listed securities on Nasdaq and NLS
Plus, which provides last sale data as well as consolidated volume from the following
Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq, FINRA/Nasdaq
TRF,27 Nasdaq OMX BX, and Nasdaq OMX PSX.28 Likewise, NYSE BQT includes
24
See supra note 6.
25
Id.
26
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
27
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq TRF).
28
See Nasdaq NLS Plus, http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus
(last visited July 8, 2014) (data feed providing last sale data as well as
consolidated volume from the following Nasdaq OMX markets for U.S.
exchange-listed securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX).
SR-EDGX-2014-25 Amendment No. 1
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BBO and last sale information for the NYSE, NYSE Arca, and NYSE MKT.29 As a
result, Nasdaq Basic and NYSE BQT comprise a significant view of the market on any
given day and both include data from multiple trading venues. As the BATS Exchanges
are consistently one of the top exchange operators by market share for U.S. equities
trading, excluding opening and closing auction volume, the data included within the
BATS One Feed will provide investors with an alternative to Nasdaq Basic and NYSE
BQT and a new option for obtaining a broad market view, consistent with the primary
goal of the market data amendments adopted by Regulation NMS.30
The Exchange believes the BATS One Feed will further enhance competition by
providing External Distributors with a data feed that allows them to more quickly and
efficiently integrate into their existing products. Today, Distributors subscribe to various
market data products offered by single exchanges and resell that data, either separately or
in the aggregate, to their subscribers as part of the their own market data offerings.
Distributors may incur administrative costs when consolidating and augmenting the data
to meet their subscriber’s need. Consequently, many External Distributors will simply
choose to not take the data because of the effort and cost required to aggregate data from
separate feeds into their existing products. Those same Distributors have expressed
interest in the BATS One Feed so that they may easily incorporate aggregated or
summarized BATS Exchange data into their own products without themselves incurring
29
See Securities Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494
(August 8, 2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule
Change Establishing the NYSE BQT Data Feed); http://www.nyxdata.com/DataProducts/NYSE-Best-Quote-and-Trades (last visited May 27, 2014) (data feed
providing unified view of BBO and last sale information for the NYSE, NYSE
Arca, and NYSE MKT).
30
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
SR-EDGX-2014-25 Amendment No. 1
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the costs of the repackaging and aggregating the data it would receive by subscribing to
each market data product offered by the individual BATS Exchanges. The Exchange,
therefore, believes that by providing market data that encompasses combined data from
affiliated exchanges, the Exchange enables certain External Distributors with the ability
to compete in the provision of similar content with other External Distributors, where
they may not have done so previously if they were required to subscribe to the depth-ofbook feeds from each individual BATS Exchange.
Although the Exchange considers the acceptance of the BATS One Feed by
External Distributors as important to the success of the product, depending on their
needs, External Distributors may choose not to subscribe to the BATS One Feed and may
rather receive the BATS Exchange individual market data products and incorporate them
into their specific market data products. For example, the BATS Premium Feed provides
depth-of-book information for up to five price levels while each of the BATS Exchange’s
individual data feeds offer complete depth-of-book and are not limited to five price
levels.31 Those subscribers who wish to view the complete depth-of-book from each
individual BATS Exchange may prefer to subscribe to one or all of individual BATS
Exchange depth-of-book data feeds instead of the BATS One Feed. The BATS One Feed
simply provides another option for Distributors to choose from when selecting a product
that meets their market data needs. Subscribers who seek a broader market view but do
not need complete depth-of- book may select the BATS One Feed while subscribers that
31
See EDGA Rule 13.8, EDGX Rule 13.8, BZX Rule 11.22(a) and (c), and BYX
Rule 11.22 (a) and (c) for a description of the depth of book feeds offered by each
of the BATS Exchanges.
SR-EDGX-2014-25 Amendment No. 1
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seek the complete depth-of-book information may subscribe to the depth-of-book feeds
of each individual BATS Exchanges.
Exchange Not the Exclusive Distributor of BATS One. Although the BATS
Exchanges are the exclusive distributors of the individual data feeds from which certain
data elements would be taken to create the BATS One Feed, the Exchange would not be
the exclusive distributor of the aggregated and consolidated information that would
compose the proposed BATS One Feed. Vendors would be able, if they chose, to create
a data feed with the same information as the BATS One Feed and distribute it to their
clients on a level-playing field with respect to latency and cost as compared to the
Exchange’s proposed BATS One Feed. The pricing the Exchange would charge for the
BATS One Feed would not be lower than the cost to a vendor of receiving the underlying
data feeds and of maintaining servers in the same facility as the Exchange to receive the
data feeds with no greater latency than the Exchange. In addition, the pricing the
Exchange would charge clients for the BATS One Feed compared to the cost of the
individual data feeds from the BATS Exchanges would enable a vendor to receive the
underlying data feeds and offer a similar product on a competitive basis and with no
greater latency than the Exchange.
Latency. The BATS One Feed is not intended to compete with similar products
offered by External Distributors. Rather, it is intended to assist External Distributors in
incorporating aggregated and summarized data from the BATS Exchanges into their own
market data products that are provided to the end user. Therefore, Distributors will
receive the data, who will, in turn, make available BATS One Feed to their end users,
either separately or as incorporated into the various market data products they provide.
SR-EDGX-2014-25 Amendment No. 1
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As stated above, Distributors have expressed a desire for a product like the BATS One
Feed so that they may easily incorporate aggregated or summarized BATS Exchange data
into their own products without themselves incurring the administrative costs of
repackaging and aggregating the data it would receive by subscribing to each market data
product offered by the individual BATS Exchanges.
Notwithstanding the above, the Exchange believes that External Distributors may
create a product similar to BATS One Feed based on the market data products offered by
the individual BATS Exchanges with no greater latency than the Exchange. As discussed
above, in order to create the BATS One Feed, the Exchange will receive the individual
data feeds from each BATS Exchange and, in turn, aggregate and summarize that data to
create the BATS One Feed. This is the same process an External Distributor would
undergo should it create a market data product similar to the BATS One Feed to
distribute to its end users. In addition, the servers of most External Distributors are likely
located in the same facilities as the Exchange, and, therefore, should receive the
individual data feed from each BATS Exchange on or about the same time the Exchange
would for it to create the BATS One Feed.
The Exchange has designed the BATS One data feed so that it would not have a
competitive advantage over a competing vendor with respect to the speed of access to
those underlying data feeds. Likewise, the BATS One data feed would not have a speed
advantage vis-à-vis competing vendors located in the same data center as the Exchange
with respect to access to end user customers, whether those end users are also located in
the same data center or not. Therefore, the Exchange believes that it will not incur any
SR-EDGX-2014-25 Amendment No. 1
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potential latency advantage that will result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Cost. With regard to cost, the Exchange will file a separate rule filing with the
Commission to establish fees for BATS One that would be designed to ensure that
vendors could compete with the Exchange by creating a similar product as the BATS One
Feed. The pricing the Exchange would charge clients for the BATS One Feed compared
to the cost of the individual data feeds from the BATS Exchanges would enable a vendor
to receive the underlying data feeds and offer a similar product on a competitive basis
and with no greater latency than the Exchange. The Distribution Fees that the Exchange
proposes for the BATS One Feed are equal to the combined fee of subscribing to each
individual data feed,32 therefore, enabling a vendor to create a competing product based
on the individual data feeds and charge its clients a fee that it believes reflects the value
of the aggregation and consolidation function that is competitive with BATS One Feed
pricing. The Exchanges believes that the incremental cost to a particular vendor for
aggregation can be supported by the vendor’s revenue opportunity and may be
inconsequential if such vendor already has systems in place to perform these functions as
part of creating its proprietary market data products and is able to allocate these costs
over numerous products and customer relationships. For these reasons, the Exchange
believes that vendors could readily offer a product similar to the BATS One Feed on a
competitive basis at a similar cost.
5.
Self-Regulatory Organization’s Statement on Comments on the Proposed Rule
Change Received from Members, Participants or Others
A similar proposed rule change was initially filed with the Commission on July
32
See supra note 22.
SR-EDGX-2014-25 Amendment No. 1
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14, 2014 and published for comment in the Federal Register on August 1, 2014.33 The
Commission received no comment letters in response to that proposed rule change.
However, three letters were submitted to the Commission commenting on a companion
BZX and EDGA filings that proposed to offer the same feed.34 On September 15, 2014,
the Commission extended its review period until October 30, 2014.35 On October 29,
2014, the Exchange withdrew the initial proposed rule change. The points raised by the
Themis Letter and Shatto Letter are either not responsive to the issues raised in the
proposal or aimed at existing elements of U.S. market structure that have been previously
approved by the Commission.
The thrust of the SIFMA Letter is aimed at the proposed fees which are being
removed from this proposed rule change and are to be filed with the Commission via a
separate rule filing. While the SIFMA Letter correctly states that the Exchange has
marketed the BATS One Feed since August 1, 2014, the SIFMA Letter incorrectly asserts
that the Exchange has offered the BATS One Feed since that same date. All of the
Exchange’s marketing materials have included statements that the BATS One Feed’s
implementation was pending to SEC approval, and at no point has the Exchange offered
33
See Securities Exchange Act Release No. 72691 (July 28, 2014), 79 FR 44892
(August 1, 2014) (SR-EDGX-2014-19).
34
But see Letter from Sal Arnuk and Joe Saluzzi, Themis Trading LLC, to Elizabeth
M. Murphy, Secretary, Commission, dated August 21, 2014 (SR-BATS-2014028) (“Themis Letter”); Letter from Ira D. Hammerman, General Counsel,
SIFMA, to Kevin O’Neill, Deputy Secretary, Commission, dated August 22, 2014
(SR-BATS-2014-028) (“SIFMA Letter”) (letters commenting on companion
BATS filing that proposes to offer the same feed); and Letter from Suzanne
Hamlet Shatto to the Commission, dated August 19, 2014 (SR-EDGA-2014-16)
(“Shatto Letter”) (letter commenting on companion EDGA filing that proposes to
offer the same feed).
35
See Securities Exchange Act Release No. 73099 (September 15, 2014), 79 FR
56418 (September 19, 2014).
SR-EDGX-2014-25 Amendment No. 1
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the BATS One product for any use other than for testing and certification.
6.
Extension of Time Period for Commission Action
Not applicable.
7.
Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for Accelerated
Effectiveness Pursuant to Section 19(b)(2)
(a)
Not applicable.
(b)
Not applicable.
(c)
Not applicable.
This proposed rule change is filed for accelerated effectiveness pursuant to
Section 19(b)(2) of the Act.36 The Exchange requests that the Commission approve this
proposed rule change on an accelerated basis pursuant to Section 19(b)(2) of the Act so
that it may be operative as soon as practicable. The Exchange believes that there is good
cause for the Commission to accelerate effectiveness because it would provide market
participants with additional transparency by disseminating the BATS Exchanges’ market
data more widely through additional distribution channels, which will enable investors to
better monitor trading activity on the BATS Exchange, and thereby serve the public
interest. Providing investors with new options for receiving market data, as the Exchange
proposes, was a primary goal of the market data amendments adopted by Regulation
NMS.37 The Exchange further believes that this proposed rule change would not impose
a burden on competition for the reasons set forth in Section 4 above. Because other
exchanges already offer or have proposed similar products,38 the Exchange’s proposed
36
15 U.S.C. 78s(b)(2).
37
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
38
See supra note 6.
SR-EDGX-2014-25 Amendment No. 1
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products will enhance competition.
The Exchange believes that accelerated effectiveness will permit the Exchange to
immediately compete with other exchanges that offer similar products.39 The Exchange
believes that potential subscribers to the BATS One Feed would welcome a market data
product that provides a competitive alternative to similar products offered by Nasdaq and
proposed by the NYSE. Accelerated effectiveness will enable the Exchange to
immediately provide investors with a new option for receiving market data and to provide
a market data product that meets the needs of prospective subscribers that are seeking
alternative to those offered by Nasdaq and proposed by the NYSE. Accordingly,
accelerated effectiveness is consistent with the protection of investors and the public
interest because it would facilitate investors’ prompt access to a competitive, alternative
market data product to those offered by NYSE and Nasdaq on a timely basis. As a result,
the Exchange believes good reasons exists for the Commission to accelerate effectiveness
of the proposed rule change.
8.
Proposed Rule Change Based on Rules of Another Self-Regulatory Organization
or of the Commission
Not applicable.
9.
Security Based-Swap Submissions Filed Pursuant to Section 3C of the Act
Not applicable.
10.
Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and
Settlement Supervision Act
Not applicable.
11.
Exhibits
39
Id.
SR-EDGX-2014-25 Amendment No. 1
Page 26 of 51
Exhibit 1 – Form of Notice of Proposed Rule Change for Federal Register.
Exhibit 5 – Text of the Proposed Rule Change.
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 27 of 51
EXHIBIT 1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-_____________; File No. SR-EDGX-2014-25)
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing of a Proposed
Rule Change to Establish a New Market Data Product called the BATS One Feed
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),1
and Rule 19b-4 thereunder,2 notice is hereby given that on ________________________,
EDGX Exchange, Inc. (the “Exchange” or “EDGX”) filed with the Securities and
Exchange Commission (“Commission”) the proposed rule change as described in Items I,
II and III below, which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change from interested
persons.
I.
Self-Regulatory Organization’s Statement of the Terms of Substance of the
Proposed Rule Change
The Exchange filed a proposal to establish a new market data product called the
BATS One Feed.
The text of the proposed rule change is available at the Exchange’s website at
http://www.directedge.com/, at the principal office of the Exchange, and at the
Commission’s Public Reference Room.
II.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements concerning
the purpose of and basis for the proposed rule change and discussed any comments it
1
15 U.S.C. 78s(b)(1).
2
17 CFR 240.19b-4.
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 28 of 51
received on the proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared summaries, set forth
in Sections A, B, and C below, of the most significant parts of such statements.
(A)
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory
Basis for, the Proposed Rule Change
1.
Purpose
The Exchange proposes to establish a new market data product called the BATS
One Feed. As described more fully below, the BATS One Feed is a data feed that will
disseminate, on a real-time basis, the aggregate best bid and offer (“BBO”) of all
displayed orders for securities traded on EDGX and its affiliated exchanges3
(collectively, the “BATS Exchanges”) and for which the BATS Exchanges report quotes
under the Consolidated Tape Association (“CTA”) Plan or the Nasdaq/UTP Plan.4 The
BATS One Feed will also contain the individual last sale information for EDGX and each
of its affiliated exchanges. In addition, the BATS One Feed will contain optional
functionality which will enable recipients to elect to receive aggregated two-sided
3
EDGX’s affiliated exchanges are EDGA Exchange, Inc. (“EDGA”), BATS
Exchange, Inc. (“BATS”), and BATS Y-Exchange, Inc. (“BYX”). On January
31, 2014, Direct Edge Holdings LLC (“DE Holdings”), the former parent
company of the Exchange and EDGA, completed its business combination with
BATS Global Markets, Inc., the parent company of BATS and BYX. See
Securities Exchange Act Release No. 71449 (January 30, 2014), 79 FR 6961
(February 5, 2014) (SR-EDGX-2013-43). Upon completion of the business
combination, DE Holdings and BATS Global Markets, Inc. each became
intermediate holding companies, held under a single new holding company. The
new holding company, formerly named “BATS Global Markets Holdings, Inc.,”
changed its name to “BATS Global Markets, Inc.”
4
The Exchange understands that each of the BATS Exchanges will separately file
substantially similar proposed rule changes with the Commission to implement
the BATS One Feed and its related fees.
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 29 of 51
quotations from the BATS Exchanges for up to five (5) price levels.
The BATS One Feed offers market data vendors and purchasers a suitable
alternative to the use of consolidated data where consolidated data are not required to be
purchased or displayed. The Exchange proposes to offer the BATS One Feed voluntarily
in response to demand from vendors, and subscribers that are interested in receiving the
aggregate BBO and last sale information from the BATS Exchanges as part of a single
data feed. Specifically, BATS One can be used by industry professionals and retail
investors looking for a cost effective, easy-to-administer, high quality market data
product with the characteristics of the BATS One Feed.
The Exchange believes that the BATS One Feed would provide high-quality,
comprehensive last sale and BBO data for the BATS Exchanges in a unified view and
respond to subscriber demand for such a product. The Exchange notes that an anticipated
end user might use the BATS One Feed for purposes of identifying an indicative price of
Tape A, B, and C securities through leveraging the depth and breadth of BATS
Exchanges without having to purchase consolidated data and thus it would not be a
latency-sensitive product. The Exchange does not anticipate that an end user would, or
could, use the BATS One Feed data for purposes of making order-routing or trading
decisions. Rather, the Exchange notes that under Rule 603 of Regulation NMS, the
BATS One Feed could not be substituted for consolidated data in all instances in which
consolidated data is used and certain subscribers would still be required to purchase
consolidated data for trading and order-routing purposes.5
5
17 CFR § 242.603(c).
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 30 of 51
Finally, the proposed BATS One Feed would provide investors with new options
for receiving market data and compete with similar market data products proposed by the
New York Stock Exchange, Inc. (“NYSE”) and those currently offered by the Nasdaq
Stock Market LLC (“Nasdaq”).6 The provision of new options for investors to receive
market data was a primary goal of the market data amendments adopted by Regulation
NMS.7
Description of the BATS One Feed
The BATS One Feed will contain the aggregate BBO of the BATS Exchanges for
all securities that are traded on the BATS Exchanges and for which the BATS Exchanges
report quotes under the CTA Plan or the Nasdaq/UTP Plan. The aggregate BBO would
include the total size of all orders at the BBO available on all BATS Exchanges.8 The
6
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq Trade Reporting Facility
(“TRF”));Nasdaq NLS Plus,
http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus (last visited July 8, 2014)
(data feed providing last sale data as well as consolidated volume from the
following Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq,
FINRA/Nasdaq TRF, Nasdaq OMX BX, and Nasdaq OMX PSX); Securities
Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494 (August 8,
2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule Change
Establishing the NYSE Best Quote & Trades (“BQT”) Data Feed);
http://www.nyxdata.com/Data-Products/NYSE-Best-Quote-and-Trades (last
visited May 27, 2014) (data feed providing unified view of BBO and last sale
information for the NYSE, NYSE Arca, and NYSE MKT).
7
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
8
The Exchange notes that quotations of odd lot size, which is generally less than
100 shares, are included in the total size of all orders at a particular price level in
the BATS One Feed but are currently not reported by the BATS Exchanges to the
consolidated tape.
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 31 of 51
BATS One Feed would also disseminate last sale information for each of the individual
BATS Exchanges (collectively with the aggregate BBO, the “BATS One Summary
Feed”). The last sale information will include the price, size, time of execution, and
individual BATS Exchange on which the trade was executed. The last sale message will
also include the cumulative number of shares executed on all BATS Exchanges for that
trading day. The Exchange will disseminate the aggregate BBO of the BATS Exchanges
and last sale information through the BATS One Feed no earlier than each individual
BATS Exchange provides its BBO and last sale information to the processors under the
CTA Plan or the Nasdaq/UTP Plan.
The BATS One Feed would also consist of Symbol Summary, Market Status,
Retail Liquidity Identifier on behalf of BYX, Trading Status, and Trade Break messages.
The Symbol Summary message will include the total executed volume across all BATS
Exchanges. The Market Status message is disseminated to reflect a change in the status
of one of the BATS Exchanges. For example, the Market Status message will indicate
whether one of the BATS Exchanges is experiencing a systems issue or disruption and
quotation or trade information from that market is not currently being disseminated via
the BATS One Feed as part of the aggregated BBO. The Market Status message will also
indicate where BATS Exchange is no longer experiencing a systems issue or disruption
to properly reflect the status of the aggregated BBO.
The Retail Liquidity Identifier indicator message will be disseminated via the
BATS One Feed on behalf of the BYX only pursuant to BYX’s Retail Price Improvement
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 32 of 51
(“RPI”) Program.9 The Retail Liquidity Identifier indicates when RPI interest priced at
least $0.001 better than BYX’s Protected Bid or Protected Offer for a particular security
is available in the System. The Exchange proposes to disseminate the Retail Liquidity
Indicator via the BATS One Feed in the same manner as it is currently disseminated
through consolidated data streams (i.e., pursuant to the Consolidated Tape Association
Plan/Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B securities, and
the Nasdaq UTP Plan for Tape C securities) as well as through proprietary BYX data
feeds. The Retail Liquidity Identifier will reflect the symbol and the side (buy or sell) of
the RPI interest, but does not include the price or size of the RPI interest. In particular,
like CQ and UTP quoting outputs, the BATS One Feed will include a field for codes
related to the Retail Price Improvement Identifier. The codes indicate RPI interest that is
priced better than BYX’s Protected Bid or Protected Offer by at least the minimum level
of price improvement as required by the Program.
The Trade Break message will indicate when an execution on a BATS Exchange
is broken in accordance with the individual BATS Exchange’s rules.10 The Trading
Status message will indicate the current trading status of a security on each individual
BATS Exchange. For example, a Trading Status message will be sent when a short sale
9
For a description of BYX’s RPI Program, see BYX Rule 11.24. See also
Securities Exchange Act Release No. 68303 (November 27, 2012), 77 FR 71652
(December 3, 2012) (SR-BYX-2012-019) (Order Granting Approval of Proposed
Rule Change, as Modified by Amendment No. 2, to Adopt a Retail Price
Improvement Program); Securities Exchange Act Release No. 67734 (August 27,
2012), 77 FR 53242 (August 31, 2012) (SR-BYX-2019-019) (Notice of Filing of
Proposed Rule Change to Adopt a Retail Price Improvement Program).
10
See, e.g., Exchange and EDGA Rule 11.13, Clearly Erroneous Executions, and
BATS and BYX Rule 11.17, Clearly Erroneous Executions.
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
Page 33 of 51
price restriction is in effect pursuant to Rule 201 of Regulation SHO (“Short Sale Circuit
Breaker”),11 or the security is subject to a trading halt, suspension or pause declared by
the listing market. A Trading Status message will be sent whenever a security’s trading
status changes.
Optional Aggregate Depth of Book. The BATS One Feed will also contain
optional functionality which will enable recipients to receive two-sided quotations from
the BATS Exchanges for five (5) price levels for all securities that are traded on the
BATS Exchanges in addition to the BATS One Summary Feed (“BATS One Premium
Feed”). For each price level on one of the BATS Exchanges, the BATS One Premium
Feed option of the BATS One Feed will include a two-sided quote and the number of
shares available to buy and sell at that particular price level.12
Implementation Date
The Exchange anticipates making available the BATS One feed as soon as
practicable after approval of the proposed rule change by the Commission and the
effectiveness of a rule filing to establish the fees for BATS One.13
2.
Statutory Basis
The Exchange believes that the proposed BATS One Feed is consistent with
11
17 CFR 242.200(g); 17 CFR 242.201
12
Recipients who do not elect to receive the BATS One Premium Feed will receive
the aggregate BBO of the BATS Exchanges under the BATS Summary Feed,
which, unlike the BATS Premium Feed, would not delineate the size available at
the BBO on each individual BATS Exchange.
13
The Exchange intends to file a separate proposal establishing the fees for BATS
One.
SR-EDGX-2014-25 Amendment No. 1
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Section 6(b) of the Act,14 in general, and furthers the objectives of Section 6(b)(5) of the
Act,15 in particular, in that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market system, and to
protect investors and the public interest, and that it is not designed to permit unfair
discrimination among customers, brokers, or dealers. This proposal is in keeping with
those principles in that it promotes increased transparency through the dissemination of
the BATS One Feed. The Exchange also believes this proposal is consistent with Section
6(b)(5) of the Act because it protects investors and the public interest and promotes just
and equitable principles of trade by providing investors with new options for receiving
market data as requested by market data vendors and purchasers that expressed an
interest in exchange-only data for instances where consolidated data is no longer required
to be purchased and displayed. The proposed rule change would benefit investors by
facilitating their prompt access to real-time last sale information and best-bid-and-offer
information contained in the BATS One Feed.
The Exchange also believes that the proposed rule change is consistent with
Section 11(A) of the Act16 in that it supports (i) fair competition among brokers and
dealers, among exchange markets, and between exchange markets and markets other than
exchange markets and (ii) the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in securities. Furthermore, the
14
15 U.S.C. 78f.
15
15 U.S.C. 78f(b)(5).
16
15 U.S.C. 78k-1.
SR-EDGX-2014-25 Amendment No. 1
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proposed rule change is consistent with Rule 603 of Regulation NMS,17 which provides
that any national securities exchange that distributes information with respect to
quotations for or transactions in an NMS stock do so on terms that are not unreasonably
discriminatory.
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to offer new and
unique market data to consumers of such data. It was believed that this authority would
expand the amount of data available to users and consumers of such data and also spur
innovation and competition for the provision of market data. The Exchange believes that
the data products proposed herein are precisely the sort of market data products that the
Commission envisioned when it adopted Regulation NMS. The Commission concluded
that Regulation NMS – by lessening regulation of the market in proprietary data – would
itself further the Act’s goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data
beyond the prices, sizes, market center identifications of the NBBO and
consolidated last sale information are not required to receive (and pay for)
such data. The Commission also believes that efficiency is promoted
when broker-dealers may choose to receive (and pay for) additional
market data based on their own internal analysis of the need for such
data.18
By removing “unnecessary regulatory restrictions” on the ability of exchanges to sell
their own data, Regulation NMS advanced the goals of the Act and the principles
reflected in its legislative history.
17
See 17 CFR 242.603.
18
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496
(June 29, 2005) (File No. S7-10-04).
SR-EDGX-2014-25 Amendment No. 1
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If the free market should determine whether proprietary data is sold to brokerdealers at all, it follows that the price at which such data is sold should be set by the
market as well. The BATS One Feed is precisely the sort of market data product that the
Commission envisioned when it adopted Regulation NMS.
The BATS One Feed would be distributed and purchased on a voluntary basis, in
that neither the BATS Exchanges nor market data distributors are required by any rule or
regulation to make this data available. Accordingly, distributors and users can
discontinue use at any time and for any reason, including due to an assessment of the
reasonableness of fees charged.
The Exchange believes that the proposed BATS One Feed will offer an alternative
to the use of consolidated data products and proprietary data products offered by the
NYSE and Nasdaq. Nasdaq Basic is a product that includes two feeds, QBBO, which
provides BBO information for all U.S. exchange-listed securities on Nasdaq and NLS
Plus, which provides last sale data as well as consolidated volume from the following
Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq, FINRA/Nasdaq
TRF,19 Nasdaq OMX BX, and Nasdaq OMX PSX.20 According to Nasdaq, seven
vendors and more than 1,000 firms subscribe to Nasdaq Basic, including 9 out of 10 of
19
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq TRF).
20
See Nasdaq NLS Plus, http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus
(last visited July 8, 2014) (data feed providing last sale data as well as
consolidated volume from the following Nasdaq OMX markets for U.S.
exchange-listed securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX).
SR-EDGX-2014-25 Amendment No. 1
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the largest banks.21
Likewise, the NYSE has proposed NYSE BQT, which would include the BBO
and last sale information for the NYSE, NYSE Arca, and NYSE MKT.22 The Exchange
believes the BATS One Feed will offer a competitive alternative to the existing Nasdaq
Basic product and the proposed NYSE product.
In addition, the proposal would not permit unfair discrimination because the
product will be available to all of the Exchange’s customers and market data vendors on
an equivalent basis. In addition, any customer that wishes to purchase one or more of the
individual data feeds offered by the BATS Exchanges would be able to do so.
In addition, the Exchange does not believe that the proposal would permit unfair
discrimination among customers, brokers, or dealers and thus is consistent with the Act
because the Exchange will be offering the product on terms that a competing vendor
could offer a competing product. Specifically, the proposed data feed does not represent
Exchange core data, but rather a new product that represents an aggregation and
consolidation of existing, previously filed individual market data products of the BATS
Exchanges. As such, a competing vendor could similarly obtain the underlying data
feeds and perform a similar aggregation and consolidation function to create the same
21
See Nasdaq Basic, Doing More with Less, available at
http://www.brainshark.com/nasdaqomx/vu?pi=zG8z33O6ozAgBpz0&tx=preview
&preview=1 and
http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic#vendors.
22
See Securities Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494
(August 8, 2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule
Change Establishing the NYSE BQT Data Feed); http://www.nyxdata.com/DataProducts/NYSE-Best-Quote-and-Trades (last visited May 27, 2014) (data feed
providing unified view of BBO and last sale information for the NYSE, NYSE
Arca, and NYSE MKT).
SR-EDGX-2014-25 Amendment No. 1
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data product with the same latency and cost as the Exchange.
The Exchange has taken into consideration its affiliated relationship with EDGA,
BYX, and BZX in its design of the BATS One Feed to assure that vendors would be able
to offer a similar product on the same terms as the Exchange, both from the perspective
of latency and cost. As discussed above, the Exchange proposes to offer the BATS One
Feed voluntarily in response to demand from vendors, and subscribers that are interested
in receiving the aggregate BBO and last sale information from the BATS Exchanges as
part of a single data feed. Specifically, BATS One can be used by industry professionals
and retail investors looking for a cost effective, easy-to-administer, high quality market
data product with the characteristics of the BATS One Feed. The BATS One Feed would
help protect a free and open market by providing vendors and subscribers additional
choices in receiving this type of market data, thus promoting competition and innovation.
With respect to latency, the path for distribution by the Exchange of BATS One
Feed would not be faster than a vendor that independently created a BATS One-like
product could distribute its own product. As such, the proposed BATS One data feed is a
data product that a competing vendor could create and sell without being in a
disadvantaged position relative to the Exchange. In recognition that the Exchange is the
source of its own market data and is affiliated with EDGA, BATS and BYX, the
Exchange represents that the source of the market data it would use to create the
proposed BATS One Feed is available to other vendors. Specifically, the Exchange
would use the following data feeds to create the proposed BATS One Feed, each of
which is available to other vendors: the Exchange’s EdgeBook Depth feed, the EdgeBook
Depth feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The BATS
SR-EDGX-2014-25 Amendment No. 1
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Exchanges will continue to make available these individual underlying feeds, and thus,
the source of the market data it would use to create the proposed BATS One feed is the
same as the source available to other vendors.
In order to create the BATS One Feed, the Exchange will receive the individual
data feeds from each BATS Exchange and, in turn, aggregate and summarize that data to
create the BATS One Feed. This is the same process a competing vendor would undergo
should it create a market data product similar to the BATS One Feed to distribute to its
end users. In addition, the servers of most competing vendors are likely located in the
same facilities as the Exchange, and, therefore, should receive the individual data feed
from each BATS Exchange on or about the same time the Exchange would for it to create
the BATS One Feed. Therefore, a competing vendor that is located in the same facilities
as the Exchange could obtain the underlying data feeds from the BATS Exchanges on the
same latency basis as the system that would be performing the aggregation and
consolidation of the proposed BATS One Feed and provide the same type of product to
its customers with the same latency they could achieve by purchasing the BATS One
Feed from the Exchange. As such, the Exchange would not have any unfair advantage
over competing vendors with respect to obtaining data from the individual BATS
Exchanges, in fact, the technology supporting the BATS One Feed would similarly need
to obtain the Exchange’s data feed as well and even this connection would be on a level
playing field with a competing vendor located at the same facility as the Exchange. The
Exchange has designed the BATS One data feed so that it would not have a competitive
advantage over a competing vendor with respect to the speed of access to those
underlying data feeds. Likewise, the BATS One data feed would not have a speed
SR-EDGX-2014-25 Amendment No. 1
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Page 40 of 51
advantage vis-à-vis competing vendors located in the same data center as the Exchange
with respect to access to end user customers, whether those end users are also located in
the same data center or not.
With regard to cost, the Exchange will file a separate rule filing with the
Commission to establish fees for BATS One which would be designed to ensure that
vendors could compete with the Exchange by creating a similar product as the BATS One
Feed. The pricing the Exchange would charge for the BATS One Feed would not be
lower than the cost to a vendor of receiving the underlying data feeds and of maintaining
servers in the same facility as the Exchange to receive the data feeds with no greater
latency than the Exchange. The pricing the Exchange would charge clients for the BATS
One Feed compared to the cost of the individual data feeds from the BATS Exchanges
would enable a vendor to receive the underlying data feeds and offer a similar product on
a competitive basis and with no greater latency than the Exchange. The Distribution Fees
that the Exchange intends to propose for the BATS One Feed would be equal to the
combined fee of subscribing to each individual data feed,23 therefore, enabling a vendor
to create a competing product based on the individual data feeds and charge its clients a
fee that it believes reflects the value of the aggregation and consolidation function that is
competitive with BATS One Feed pricing. The Exchanges believes that the incremental
cost to a particular vendor for aggregation can be supported by the vendor’s revenue
23
The combined external distribution fee for the individual data feeds of the BATS
Exchanges is $12,500.00 per month. The monthly external distribution fee is
$2,500 per month for the EdgeBook Depth feed for the Exchange, $2,500 per
month for the EdgeBook Depth feed for EDGA, $2,500 for the BYX PITCH
Feed, and $5,000 for the BATS PITCH Feed.
SR-EDGX-2014-25 Amendment No. 1
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opportunity and may be inconsequential if such vendor already has systems in place to
perform these functions as part of creating its proprietary market data products and is able
to allocate these costs over numerous products and customer relationships. For these
reasons, the Exchange believes that vendors could readily offer a product similar to the
BATS One Feed on a competitive basis at a similar cost.
(B)
Self-Regulatory Organization’s Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will result in any
burden on competition that is not necessary or appropriate in furtherance of the purposes
of the Act, as amended. Because other exchanges already offer similar products,24 the
Exchange’s proposed BATS One Feed will enhance competition. Specifically, the BATS
One Feed was developed to compete with similar market data products offered by
Nasdaq and proposed by the NYSE.25 The BATS One Feed will foster competition by
providing an alternative market data product to those offered by Nasdaq and the NYSE.
This proposed new data feed provides investors with new options for receiving market
data, which was a primary goal of the market data amendments adopted by Regulation
NMS.26
The proposed BATS One Feed would enhance competition by offering a market
data product that is designed to compete directly with similar products offered by the
NYSE and Nasdaq. Nasdaq Basic is a product that includes two feeds, QBBO, which
24
See supra note 6.
25
Id.
26
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
SR-EDGX-2014-25 Amendment No. 1
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provides BBO information for all U.S. exchange-listed securities on Nasdaq and NLS
Plus, which provides last sale data as well as consolidated volume from the following
Nasdaq OMX markets for U.S. exchange-listed securities: Nasdaq, FINRA/Nasdaq
TRF,27 Nasdaq OMX BX, and Nasdaq OMX PSX.28 Likewise, NYSE BQT includes
BBO and last sale information for the NYSE, NYSE Arca, and NYSE MKT.29 As a
result, Nasdaq Basic and NYSE BQT comprise a significant view of the market on any
given day and both include data from multiple trading venues. As the BATS Exchanges
are consistently one of the top exchange operators by market share for U.S. equities
trading, excluding opening and closing auction volume, the data included within the
BATS One Feed will provide investors with an alternative to Nasdaq Basic and NYSE
BQT and a new option for obtaining a broad market view, consistent with the primary
goal of the market data amendments adopted by Regulation NMS.30
The Exchange believes the BATS One Feed will further enhance competition by
27
See Nasdaq Basic, http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic
(last visited May 29, 2014) (data feed offering the BBO and Last Sale information
for all U.S. exchange-listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq TRF).
28
See Nasdaq NLS Plus, http://www.nasdaqtrader.com/Trader.aspx?id=NLSplus
(last visited July 8, 2014) (data feed providing last sale data as well as
consolidated volume from the following Nasdaq OMX markets for U.S.
exchange-listed securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX).
29
See Securities Exchange Act Release No. 72750 (August 4, 2014), 79 FR 46494
(August 8, 2014) (SR-NYSE-2014-40) (Notice of Filing of Proposed Rule
Change Establishing the NYSE BQT Data Feed); http://www.nyxdata.com/DataProducts/NYSE-Best-Quote-and-Trades (last visited May 27, 2014) (data feed
providing unified view of BBO and last sale information for the NYSE, NYSE
Arca, and NYSE MKT).
30
See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, at
37503 (June 29, 2005) (Regulation NMS Adopting Release).
SR-EDGX-2014-25 Amendment No. 1
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Page 43 of 51
providing External Distributors with a data feed that allows them to more quickly and
efficiently integrate into their existing products. Today, Distributors subscribe to various
market data products offered by single exchanges and resell that data, either separately or
in the aggregate, to their subscribers as part of the their own market data offerings.
Distributors may incur administrative costs when consolidating and augmenting the data
to meet their subscriber’s need. Consequently, many External Distributors will simply
choose to not take the data because of the effort and cost required to aggregate data from
separate feeds into their existing products. Those same Distributors have expressed
interest in the BATS One Feed so that they may easily incorporate aggregated or
summarized BATS Exchange data into their own products without themselves incurring
the costs of the repackaging and aggregating the data it would receive by subscribing to
each market data product offered by the individual BATS Exchanges. The Exchange,
therefore, believes that by providing market data that encompasses combined data from
affiliated exchanges, the Exchange enables certain External Distributors with the ability
to compete in the provision of similar content with other External Distributors, where
they may not have done so previously if they were required to subscribe to the depth-ofbook feeds from each individual BATS Exchange.
Although the Exchange considers the acceptance of the BATS One Feed by
External Distributors as important to the success of the product, depending on their
needs, External Distributors may choose not to subscribe to the BATS One Feed and may
rather receive the BATS Exchange individual market data products and incorporate them
into their specific market data products. For example, the BATS Premium Feed provides
depth-of-book information for up to five price levels while each of the BATS Exchange’s
SR-EDGX-2014-25 Amendment No. 1
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individual data feeds offer complete depth-of-book and are not limited to five price
levels.31 Those subscribers who wish to view the complete depth-of-book from each
individual BATS Exchange may prefer to subscribe to one or all of individual BATS
Exchange depth-of-book data feeds instead of the BATS One Feed. The BATS One Feed
simply provides another option for Distributors to choose from when selecting a product
that meets their market data needs. Subscribers who seek a broader market view but do
not need complete depth-of- book may select the BATS One Feed while subscribers that
seek the complete depth-of-book information may subscribe to the depth-of-book feeds
of each individual BATS Exchanges.
Exchange Not the Exclusive Distributor of BATS One. Although the BATS
Exchanges are the exclusive distributors of the individual data feeds from which certain
data elements would be taken to create the BATS One Feed, the Exchange would not be
the exclusive distributor of the aggregated and consolidated information that would
compose the proposed BATS One Feed. Vendors would be able, if they chose, to create
a data feed with the same information as the BATS One Feed and distribute it to their
clients on a level-playing field with respect to latency and cost as compared to the
Exchange’s proposed BATS One Feed. The pricing the Exchange would charge for the
BATS One Feed would not be lower than the cost to a vendor of receiving the underlying
data feeds and of maintaining servers in the same facility as the Exchange to receive the
data feeds with no greater latency than the Exchange. In addition, the pricing the
31
See EDGA Rule 13.8, EDGX Rule 13.8, BZX Rule 11.22(a) and (c), and BYX
Rule 11.22 (a) and (c) for a description of the depth of book feeds offered by each
of the BATS Exchanges.
SR-EDGX-2014-25 Amendment No. 1
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Exchange would charge clients for the BATS One Feed compared to the cost of the
individual data feeds from the BATS Exchanges would enable a vendor to receive the
underlying data feeds and offer a similar product on a competitive basis and with no
greater latency than the Exchange.
Latency. The BATS One Feed is not intended to compete with similar products
offered by External Distributors. Rather, it is intended to assist External Distributors in
incorporating aggregated and summarized data from the BATS Exchanges into their own
market data products that are provided to the end user. Therefore, Distributors will
receive the data, who will, in turn, make available BATS One Feed to their end users,
either separately or as incorporated into the various market data products they provide.
As stated above, Distributors have expressed a desire for a product like the BATS One
Feed so that they may easily incorporate aggregated or summarized BATS Exchange data
into their own products without themselves incurring the administrative costs of
repackaging and aggregating the data it would receive by subscribing to each market data
product offered by the individual BATS Exchanges.
Notwithstanding the above, the Exchange believes that External Distributors may
create a product similar to BATS One Feed based on the market data products offered by
the individual BATS Exchanges with no greater latency than the Exchange. As discussed
above, in order to create the BATS One Feed, the Exchange will receive the individual
data feeds from each BATS Exchange and, in turn, aggregate and summarize that data to
create the BATS One Feed. This is the same process an External Distributor would
undergo should it create a market data product similar to the BATS One Feed to
distribute to its end users. In addition, the servers of most External Distributors are likely
SR-EDGX-2014-25 Amendment No. 1
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Page 46 of 51
located in the same facilities as the Exchange, and, therefore, should receive the
individual data feed from each BATS Exchange on or about the same time the Exchange
would for it to create the BATS One Feed.
The Exchange has designed the BATS One data feed so that it would not have a
competitive advantage over a competing vendor with respect to the speed of access to
those underlying data feeds. Likewise, the BATS One data feed would not have a speed
advantage vis-à-vis competing vendors located in the same data center as the Exchange
with respect to access to end user customers, whether those end users are also located in
the same data center or not. Therefore, the Exchange believes that it will not incur any
potential latency advantage that will result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Cost. With regard to cost, the Exchange will file a separate rule filing with the
Commission to establish fees for BATS One that would be designed to ensure that
vendors could compete with the Exchange by creating a similar product as the BATS One
Feed. The pricing the Exchange would charge clients for the BATS One Feed compared
to the cost of the individual data feeds from the BATS Exchanges would enable a vendor
to receive the underlying data feeds and offer a similar product on a competitive basis
and with no greater latency than the Exchange. The Distribution Fees that the Exchange
proposes for the BATS One Feed are equal to the combined fee of subscribing to each
individual data feed,32 therefore, enabling a vendor to create a competing product based
on the individual data feeds and charge its clients a fee that it believes reflects the value
32
See supra note 22.
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of the aggregation and consolidation function that is competitive with BATS One Feed
pricing. The Exchanges believes that the incremental cost to a particular vendor for
aggregation can be supported by the vendor’s revenue opportunity and may be
inconsequential if such vendor already has systems in place to perform these functions as
part of creating its proprietary market data products and is able to allocate these costs
over numerous products and customer relationships. For these reasons, the Exchange
believes that vendors could readily offer a product similar to the BATS One Feed on a
competitive basis at a similar cost.
(C)
Self-Regulatory Organization’s Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
A similar proposed rule change was initially filed with the Commission on July
14, 2014 and published for comment in the Federal Register on August 1, 2014.33 The
Commission received no comment letters in response to that proposed rule change.
However, three letters were submitted to the Commission commenting on a companion
BZX and EDGA filings that proposed to offer the same feed.34 On September 15, 2014,
33
See Securities Exchange Act Release No. 72691 (July 28, 2014), 79 FR 44892
(August 1, 2014) (SR-EDGX-2014-19).
34
But see Letter from Sal Arnuk and Joe Saluzzi, Themis Trading LLC, to Elizabeth
M. Murphy, Secretary, Commission, dated August 21, 2014 (SR-BATS-2014028) (“Themis Letter”); Letter from Ira D. Hammerman, General Counsel,
SIFMA, to Kevin O’Neill, Deputy Secretary, Commission, dated August 22, 2014
(SR-BATS-2014-028) (“SIFMA Letter”) (letters commenting on companion
BATS filing that proposes to offer the same feed); and Letter from Suzanne
Hamlet Shatto to the Commission, dated August 19, 2014 (SR-EDGA-2014-16)
(“Shatto Letter”) (letter commenting on companion EDGA filing that proposes to
offer the same feed).
SR-EDGX-2014-25 Amendment No. 1
Exhibit 1
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the Commission extended its review period until October 30, 2014.35 On October 29,
2014, the Exchange withdrew the initial proposed rule change. The points raised by the
Themis Letter and Shatto Letter are either not responsive to the issues raised in the
proposal or aimed at existing elements of U.S. market structure that have been previously
approved by the Commission.
The thrust of the SIFMA Letter is aimed at the proposed fees which are being
removed from this proposed rule change and are to be filed with the Commission via a
separate rule filing. While the SIFMA Letter correctly states that the Exchange has
marketed the BATS One Feed since August 1, 2014, the SIFMA Letter incorrectly asserts
that the Exchange has offered the BATS One Feed since that same date. All of the
Exchange’s marketing materials have included statements that the BATS One Feed’s
implementation was pending to SEC approval, and at no point has the Exchange offered
the BATS One product for any use other than for testing and certification.
III.
Date of Effectiveness of the Proposed Rule Change and Timing for Commission
Action
Within 45 days of the date of publication of this notice in the Federal Register or
within such longer period (i) as the Commission may designate up to 90 days of such date
if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii) as to which the Exchange consents, the Commission will: (a) by order approve or
disapprove such proposed rule change, or (b) institute proceedings to determine whether
the proposed rule change should be disapproved.
35
See Securities Exchange Act Release No. 73099 (September 15, 2014), 79 FR
56418 (September 19, 2014).
SR-EDGX-2014-25 Amendment No. 1
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IV.
Solicitation of Comments
Interested persons are invited to submit written data, views and arguments
concerning the foregoing, including whether the proposal is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments:

Use the Commission’s Internet comment form
(http://www.sec.gov/rules/sro.shtml); or

Send an e-mail to [email protected]. Please include File No. SR-EDGX2014-25 on the subject line.
Paper Comments:

Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities
and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to File No. SR-EDGX-2014-25. This file number should be
included on the subject line if e-mail is used. To help the Commission process and review
your comments more efficiently, please use only one method. The Commission will post
all comments on the Commission’s Internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written statements with respect
to the proposed rule change that are filed with the Commission, and all written
communications relating to the proposed rule change between the Commission and any
person, other than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and printing in the
Commission’s Public Reference Room, 100 F Street, NE, Washington, DC 20549, on
official business days between the hours of 10:00 am and 3:00 pm. Copies of such filing
will also be available for inspection and copying at the principal office of the Exchange.
SR-EDGX-2014-25 Amendment No. 1
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All comments received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit only information
that you wish to make available publicly. All submissions should refer to File No. SREDGX-2014-25 and should be submitted on or before [_______21 days from publication
in the Federal Register].
For the Commission, by the Division of Trading and Markets, pursuant to
delegated authority.36
Kevin M. O’Neill
Deputy Secretary
36
17 CFR 200.30-3(a)(12).
SR-EDGX-2014-25 Amendment No. 1
Exhibit 5
Page 51 of 51
Exhibit 5
Additions are underlined; deleted text is in [brackets].
CHAPTER XIII. MISCELLANEOUS PROVISIONS
Rules 13.1 – 13.7 (No change)
Rule 13.8
EDGX Book Feeds
(a)
EDGX Book Feed. The EDGX Book Feed is a data feed that contains all displayed
orders for listed securities trading on EDGX, order executions, order cancellations, order
modifications, order identification numbers, and administrative messages.
([b]i) Members may obfuscate their unique order identifications number on EDGX
Book Feed per Market Participant Identifier for all logical ports or specific logical ports
for subsequent replenishments of reserve orders, as designated by the Member. In order
to do so, the Member must contact the Exchange’s Member Services (“Member
Services”) department. In such case, a randomly generated order identification number
would be applied the next trading day by the Exchange for all subsequent replenishments
of reserve orders until further instructions are received by Member Services from the
Member.
(b)
BATS Aggregated Market (“BATS One”) Feed. The BATS One Feed is a data feed that
contains the aggregate best bid and offer of all displayed orders for securities traded on EDGX
and its affiliated exchanges. The BATS One Feed also contains the individual last sale
information for EDGX and each of its affiliated exchanges. The BATS One Feed also consists
of Symbol Summary, Market Status, Retail Liquidity Identifier (on behalf of BATS-Y Exchange,
Inc., an affiliated exchange of EDGX), Trading Status, and Trade Break messages.
(i)
Depth of Book. BATS One Feed recipients may also elect to receive aggregated
two-sided quotations from EDGX and each of its affiliated exchanges for five (5) price
levels.
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